A Budget Not for Europe

The thing that was really important was how much money each of the leaders brings (in the so called “envelope”) to their countries, and not the answer to the question – where will Europe be in 2020? This financial agreement is without any political vision and actually divides Europe rather than unites it. (…) Most likely, during the plenary session in March, the European Parliament will adopt a resolution which will confirm the intention to reject long-term financial frameworks proposed by the Council.

After the recent European Union summit, the leaders of all member states returned home with a feeling of a job well-done, and above all, they came back as winners. Cameron came home with a discount in an unaltered state and lower payments, Tusk came back with more than 70 billion euros in his pocket, Dutchmen, Swedes and Austrians gained discounts to their contributions, Frenchmen protected Common Agricultural Policy… and in this way we could enumerate until we get to 28. Everyone “took a piece of European cake”, which is nearly 3.5% smaller than the one for 2007-2013. But there is a question: what do we have left? How much money will be spent on financing projects according to the ideas of the European Union?

The suggestion of the Commission concerning financial framework for 2004-2020 from June 2011 is the budget for Europe 2020 for stable growth and economic development. These are investments in research, innovations and education. According to nomenclature, all these goals are financed within the scope of 1A category. This is a part of the budget in which we can find such programmes as Horizon 2020, COSME, Erasmus, as well as such grand-scale projects like ITER (International Thermonuclear Experimental Reactor), GMES (Global Monitoring for Environment and Security) or Galileo. The new suggestion of the Commission is “Connecting Europe Facility”, the aim of which is to invest in international projects in the area of transport, energy and telecommunication (mainly broadband Internet access). This programme is one of the main “victims” of the agreement reached on Friday. The amount of money allocated for this programme dwindled from 42 billion euros proposed by the Commission to a bit over 29 billion euros. Galileo and GMES projects are also the “victims”. It is peculiar that a budget category named “Competitiveness for growth and employment” is reduced by 1/4 compared to Commission’s suggestion! Europe should be gradually recovering from the crisis and restoring its position. Strained national budgets are not able to carry the burden of additional investments, so the Commission met them halfway and suggested such outlays and division of funds to make the added value of every euro spent as high as possible. Another aim is to strengthen the common market, so that we could freely exchange experiences and benefit from good things, which (acting alone) we would be trying to achieve for many, many years. But thanks to the decisions of leaders of the European Union, for sure we will not be able to go freely by train from Warsaw to Marseille very soon without changing, booking a lot of tickets etc. Within Connecting Europe Facility, connections between countries were to be created in such a way as to improve one of the basic liberties, that is, the free movement of people. For sure, Poland effectively contributed to a significant restriction of funds for this project. The day before the summit, one of the high-ranking officials of the Ministry of Finance confirmed that Polish priorities are structural funds and agriculture, so every restriction of funds can concern 1A category because Poland uses them least of all, taking into account still ailing innovation and competitiveness of Polish economy. Such a way of thinking prevailed on the recent European Union summit. It was of importance how much each of the leaders brings to their country in the so called “envelope” rather than getting an answer to the question “where will Europe be in 2020?”. This financial agreement is without any political vision and divides Europe instead of uniting it. This is the agreement the aim of which is not an ambitious promotion of growth and investments to enable Europe to recover from the crisis, but a financial agreement which eases the tensions between member states of the European Union. We should not be surprised and indignant when Nigel Farage – the president of UKIP (United Kingdom Independence Party) – states that he does not understand why he is to pay for a new underground line in Warsaw instead of spending money in Great Britain, because this is the level of discussion in the Council where the European spirit is hard to find.

The agreement on the level of the European Council is not the end of the battle. Pursuant to Art. 312 of the Treaty on European Union, the Council adopts a regulation unanimously and after obtaining consent of the European Parliament which stipulates long-term financial frameworks. That is why we are halfway to a possible solution. During the summit, presidents of the biggest factions in the European Parliament (Joseph Daul, Hannes Swoboda, Guy Verhofstadt, Rebecca Harms and Daniel Cohn-Bendit) issued a joint declaration in which they firmly state that the Parliament cannot accept the agreement as it is, in the form adopted by the Council. They are sorry to state that within the past few months Herman Van Rompuy did not lead any negotiations with the Parliament. Probably already during the plenary session in March, the Parliament will adopt the resolution which will confirm the intention to reject long-term financial frameworks, as they stand, suggested by the Council, and will again refer to conditions essential for such an agreement. Deputies are fully aware that they will be under great pressure to accept the agreement, hence there is an idea of President Schulz that the voting should be secret. Parliamentarians are aware that the issue of figures is surely not to be negotiated but there are many additional conditions which should be fulfilled: greater flexibility between categories of expenditures and the years ratified by qualified majority of votes in the Council, a compulsory clause concerning the review of budget for 2-3 years, creating an own new system of financing for the European Union which would gradually substitute present premiums from member states’ budgets and a future-oriented budget which strengthens the competitiveness of economy. The March parliamentary resolution is to be a signal for the Council that the agreement, which is not good for Europe, will be rejected. The final decision will not be made before June 2013.

There is one more issue concerning the agreement reached on Friday which we should pay attention to. The European Union budget means two issues: liabilities and payments. The first one means the amount of money which can be allocated to projects and the second one means a real flow of money between the Commission and beneficiaries (including member states).

The difference between these two issues amounts to 5 percentage points in the favour of liabilities. In Commission’s suggestion this ratio amounts to 95.6%, in the present financial framework 2007-2013: 95%. According to the Council’s agreement it is 94.6% – that is 960 billion euros for liabilities and 908 billion euros for payments. To make it simpler, it can be stated that the Council presupposes that 52 billion euros will not be used. It is possible but let us not forget about the N+2 rule (and with some exceptions even N+3) concerning structural funds spending where payments (when looking from the present financial perspective) can be realised up to the end of 2015. The problem of too low level of payments for the third time in a row, in November 2012, led to annual budget negotiations between the Parliament and the Council. The result of the delayed implementation of programmes within the scope of financial perspective 2007-2013 was that the Council got used to the low level of payments in the years 2007-2009. However, the amount of money that should be paid according to invoices sent to the Commission has been systematically increasing since 2010. The Commission covers these invoices from available funds and suggests an amending budget in the case of shortages. In 2012, the missing amount was 9 billion euros. In the end, we managed with difficulties to negotiate the increase in the 2012 budget by 6.1 billion euros, and 2.9 billion euros were reallocated for 2013. It is worth mentioning that this amount concerns only settlements which were sent to the Commission before 31st October 2012. The amount missing as of this date is … 16 billion euros. Soon there will be intensive negotiation between the Council and the Parliament on amending the budget for 2013, which can concern even the whole amount mentioned above. Negotiating a new financial framework with blatantly low level of payments means getting EU budget into deficit, as first of all invoices from the above mentioned financing period will have to be paid off. And what about new projects? Who is going to pay for them?